Shell flags $400 million hurricane hit, but boost from soaring prices

Royal Dutch Shell warned of a $400 million hit to third-quarter earnings from the damage caused by August’s Hurricane Ida. 

However, in an update ahead of quarterly results this month, the oil major also flagged a boost to cashflows from soaring natural gas and electricity prices.

Gas and power prices have been surging as tight gas supplies have collided with strong demand in economies recovering from the COVID-19 pandemic.

Shell is the world’s top seller of liquefied natural gas (LNG), accounting for about 20% of global demand, though its sales have declined in recent months because of production problems.

The company said third-quarter cashflow at its LNG division “is expected to be significantly impacted by large variation margin inflows on the back of the prevailing gas and electricity price environment”.

Shell will be holding more cash from buyers as deposits in the face of the large fluctuations in gas prices. The cash will eventually flow back out as prices cool.

Liquefaction in the quarter is expected to be between 7 and 7.5 million tonnes, the lowest since 2016, “reflecting feedgas constraints and additional maintenance”, Shell said.

LNG earnings will, however, receive a boost from stronger trading results, it added.

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